Blue Chip Gold Stocks HM, NEM, ASA, ABX, PDG Message Board

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Gold/Mining/Energy : Blue Chip Gold Stocks HM, NEM, ASA, ABX, PDG

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To: Zardoz who wrote (438)	6/29/1999 3:00:00 PM
From: Exsrch	Read Replies (1) of 48092

Hutch, You address alot in your note. So let me apologize for addressing them in a disorganized manner. I don't have the time to organize the type of response I normally would provide. <<..So would not an increase in price of gold have a negative effect on earnings, while interest rates are rising?..>> The answer is no. If you look at ABX's annual report it give US$385 as a locked in minium it would earn. Because: - Borrowed gold sold at spot plus - Minium weighted average interest earned on self managed portfolio of US treasuries which produces US$385 average ounce sold (barrowed gold sold at spot+(total cantango earned/total production)) Hence depending on what they earn in interest the point you incur an opportunity cost could be significantly higher than US$385. Especially if they can make more cantago (1% increase nets $40 million per year, see ABX homepage). Furthermore, because ABX engages in a spot deferred contract when AU prices rise significantly they can opt to defer the contract to return gold to CB for up to 10 year. This gives them the option to sell their gold at higher prices on the spot market. ABX would incur a transaction and carrying cost for the deferral; however, it would be negligable to earning (especially if gold rises dramatically). Therefore, ABX can earn and invest in itself during low AU prices while competitors cannot. And, when prices increase ABX can also benefit from the upside. Though our horizon in terms of time is diffent we both agree there is a time to buy and a time to sell. Cheers, Exsrch P.S. You can verify all that I have said at www.barrick.com or Edgar for all SEC filing for ABX.

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